WASHINGTON, March 5 (Reuters) - U.S. House of Representatives’ Financial Services Chairman Barney Frank on Friday said he agrees with the Obama administration’s decision to fully back Fannie Mae and Freddie Mac bondholders to provide stability to the housing market and broader financial system.
At the same time, the powerful committee chairman said it would be a mistake to give Fannie and Freddie bondholders the same legal status as holder of U.S. government debt by putting their obligations on the federal books.
“Specifically, I support the intention of the Treasury to stand fully behind the terms of its December 24 statement with regard to Fannie and Freddie debt,” Frank said in a statement.
The comments come just hours after Frank said bondholders of major mortgage finance sources Fannie Mae FNM.N and Freddie Mac FRE.N should not assume the federal government will guarantee the debt of these government-sponsored enterprises at 100 cents on the dollar and they could theoretically suffer losses.
“It is also the case in going forward, as we restructure housing finance, we will make sure that there are no implicit guarantees, hints, suggestions, or winks and nods,” Frank said in the prepared statement. “We will be explicit about what is and is not an obligation of the federal government,” he added.
Frank’s statement followed a statement from the Treasury Department that it was standing behind Fannie and Freddie.